East Africa firms grip on Africa mobile money

The Covid-19 pandemic has been a catalyst to financial inclusion in Africa, which recorded a 12 percent increase in mobile money penetration in 2020, according to the industry body, GSMA’s 2021 State of the Industry Report on Mobile Money.

Government directives asking citizens to adopt cashless transactions during the pandemic saw the continent continue to dominate the global mobile money industry, with 171 of the total 310 digital transaction services across the world being in Africa.

The survey indicates that Africa had 562 million registered mobile money accounts of which 161 million were active, a transaction volume of 27.5 billion with a value of Sh50 trillion, which is a 23 per cent increase from 2019.

That translates to Sh4.1 billion transacted a month, Sh137 million per day and Sh5.7 million per hour.

East Africa contributed the highest in Africa, with 293 million registered users and 94 million active users transacting 18.6 billion times, a value of Sh28 trillion in 2020.

“Although absolute growth was highest in West and East Africa, southern Africa grew the fastest at 24 per cent,” says the GSMA report.

An independent fact check by the Business Daily nonetheless shows that the value of mobile money transactions in East Africa provided by GSMA may be questionable among some critics. This is because data by other entities show that Kenya — which is primed as the leading market for cashless transactions — only handled about a quarter of the stated figure for the region.

For instance, data by the Central Bank of Kenya (CBK) shows that Kenyans moved Sh5.21 trillion through their phones in 2020 — an equivalent of half of the country’s estimated gross domestic product — driven by relief measures on mobile phone payments to help to curb the spread of the coronavirus.

The value of mobile money transactions in Kenya in 2020 marked a 20 per cent rise from Sh4.34 trillion the previous year. This means that an average of Sh14.27 billion was transacted on mobile phones by Kenyans daily between January and December 2020 — some Sh2.81 billion higher than the Sh11.91 billion daily average in 2019.

According to the GSMA report southern Africa, which has been lagging in mobile money adoption across all five African regions, recorded a historical rise of 43 per cent of transaction volumes, higher than any other regions, but with the lowest value of Sh300 billion, which was, however, a 24 per cent increase from the previous year.

West Africa followed East Africa, with 198 million registered accounts of which 47 million were active, transacting 6.4 billion times amounting to Sh18 trillion.

Central Africa came third, transacting 2.2 billion times a value of Sh3.6 trillion on 16 million active accounts.

North Africa had only one million of its 14 million registered users being active, and they transacted 77 million times a value of Sh550 billion.

“With more than Sh200 billion being transacted every day, mobile money became a part of a new daily routine for millions around the world,” states the report.

In 2020, the number of registered accounts grew by 12.7 per cent globally to 1.21 billion accounts — double the forecast growth rate.

Apart from changes in consumer behaviour, the high uptake was due to regulators implementing more flexible Know Your Customer processes and relaxing on-boarding requirements to make it easier to open an account, the study explains.

With 300 million monthly active accounts, mobile money providers became an integral part of the national Covid-19 response in many markets, offering a secure and ready channel to disburse pandemic relief payments to the public quickly, securely and efficiently

“Many of the socio-economic and development challenges arising from the pandemic are being tackled with mobile money tools,” said Mats Granryd, director-general at the GSMA.

In terms of the value of money transacted in 2020, sub-Saharan Africa was followed by South Asia with Sh13 trillion (10 per cent increase) and East Asia and Pacific with Sh11.1 trillion that was 34 per cent higher than in 2019.

Latin America and the Caribbean came fourth, with a transaction value of Sh2 trillion, a 30 per cent increase. The Middle East and North Africa came fifth with Sh1 trillion in transactions, a 26 per cent rise.

Europe and Central Asia recorded the lowest transactions, at Sh400 billion in value the entire year but that was 13 per cent more than in 2019.

Akinwale Goodluck, head of sub-Saharan Africa at GSMA told the Business Daily that Africa’s high command in the global mobile money industry is attributable to the continent being the pioneer of the cashless service.

“The financial innovation of mobile money has its roots grounded in Africa. Agents have remained a core element of the industry in Africa, enabling underserved populations to digitally participate in the formal economy,” he expounded.

Since its inception, mobile money has attracted significant investment in technological and financial infrastructure as well as the development of extensive agent distribution networks in Africa where collaboration with banks, governments and businesses has allowed customers to diversify the usage of their mobile money accounts beyond basic utilisation.

“This has solidified the daily use of mobile money for the average African citizen. For example, in June 2020, 19 per cent of monthly active accounts in sub-Saharan Africa made a bill payment, 13 per cent received bulk payments and 10 per cent performed a merchant payment,” he added.

Mature mobile money markets in Africa such as Kenya, Ghana and Ivory Coast are moving beyond transfers and payments to more sophisticated products such as credit, savings and insurance.

In July 2020 Orange Bank Africa launched a digital bank in Côte d’Ivoire to offer nano-credit and savings products.

Kenya’s Safaricom has also witnessed a high number of utilisation of its Fuliza overdraft facility, where overdrafts rose from Sh112.2 billion to Sh149.4 billion in the six months to September 2020, translating to a daily borrowing of Sh830 million.

African micro-insurance fintech Ayo Holdings, a joint venture between MTN and financial services group Momentum Metropolitan Holdings, has also seen large expansion across the continent reaching 10 million customers in under four years.

The severe impact of the virus on economies and people’s lives moved regulators to respond with a variety of measures such as waiving transaction fees, declaring mobile money providers and agents an essential service, maintaining liquidity for agents and enabling government social transfers to be disbursed directly to mobile money wallets.

Countries that adopted these measures drove the digitisation of payments, limited the handling of cash and cushioned the most vulnerable segments of society from the devastating effects of the pandemic.

“The pandemic was also a catalyst for regulatory institutions to make decisions and implement measures that may have been pending. For instance, many providers had in the past sought to increase transaction limits without success, but the pandemic accelerated this change,” the report notes.

In the first weeks and months of the Covid-19 outbreak, regional and national lockdowns had an impact on agent activity, but the research indicates that on average, activity never dropped below 50 per cent, in part because of the rapid response of mobile money providers.

“This included the distribution of personal protective equipment and hand sanitising gel at agent counters. In Mozambique, Vodacom M-Pesa set up 30,000 handwashing stations at agent outlets across the country.”

The GSMA estimates there are 5.2 million unique agent outlets globally, and in December 2020, the total number of registered mobile money agents had reached 9.1 million.

The unique challenges of 2020 also prompted mobile money providers to further invest in additional payment technologies. A study led by the Cambridge Centre for Alternative Finance showed that close to half of all mobile money providers deployed additional payment channels during the pandemic.

According to the study, QR codes have become the second most-offered channel for merchant payments, after USSD, with 39 per cent of providers that responded to the 2020 Global Adoption Survey identifying QR codes as an acceptable technology.

Through it all, the mobile money industry showed remarkable resilience and an ability to serve the needs of the most financially vulnerable and provide vital services in an urgent time of need.

Revenues dropped

However, the economics of mobile money changed as consumer spending declined, fee waivers were introduced and revenues dropped.

And though Africa continues to score big on the international mobile money stage, there is unequal access to mobile ownership between men, women and people with disabilities.

According to GSMA’s Mobile Gender Gap Report, there are still 74 million women unconnected and a 13 per cent gender gap in mobile ownership in sub-Saharan Africa.

“Addressing this gap can contribute to enhancing financial inclusion in the region,” said Mr Goodluck

According to the World Bank’s 2020 Global Findex database, women in sub-Saharan Africa are still 20 per cent less likely than men to own a mobile money account.

The top two barriers constraining mobile ownership in Africa, for both men and women, remains affordability coupled with a lack of literacy and digital skills.

“Investments in digital literacy programmes, the availability of cheaper smartphones and higher provisions of handset customer loans all contribute to the accessibility of mobile money and driving further financial inclusion in the region.”

Mr Goodluck points out that making the industry more interoperable between different mobile money providers and with banks could also help in achieving universal financial inclusion.

“This will allow customers to transact to both unbanked and underserved populations and in doing so, tie the formal and informal parts of economies together,” he adds.

But connecting Africa’s mobile money industry with the formal international financial systems could prove to be most pivotal, as the industry transitions to the ‘payments as a platform’ model.

The approach would not only make mobile money a more sustainable and profitable venture for mobile operators but also contribute to the economic empowerment of individuals, communities and enterprises.